Economics Unit 2: Supply, Demand, and Elasticity

A complete set of 42 vocabulary flashcards reviewing supply, demand, equilibrium, and elasticity concepts from Economics Unit 2.

competitive market

a market with many buyers and sellers where no single person controls the price

supply and demand model

a model showing how buyers and sellers determine prices and quantities in a market

supply schedule

a table showing how much of a good producers are willing to sell at different prices.

quantity supplied

the amount of a good producers are willing to sell at a specific price

supply curve

An upward-sloping graph showing the relationship between price and quantity supplied.

shift of the supply curve

when the entire supply curve moves left or right because of a factor other than the good's own price (right - increase in supply, left - decrease in supply)

movement along the supply curve

a change in quantity supplied caused by a change in the good's own price

input

a resource used to produce a good or service, such as labor, materials, or machinery

individual supply curve

a graph showing how much one producer is willing to sell at different prices

quantity demanded

the amount of a good consumers are willing to buy at a specific price

demand schedule

a table showing how much consumers are willing to buy at different prices

demand curve

a downward-sloping graph showing the relationship between price and quantity demanded

law of demand

as price increases, quantity demanded decreases, and vice versa

shift of the demand curve

when the entire demand curve moves left or right because of a factor other than the good's own price (right - increase in demand, left - decrease in demand)

movement along the demand curve

a change in quantity demanded caused by a change in the good's own price

substitutes

goods that can replace each other. example: coke and pepsi

complements

goods that are used together. example: printers and ink

normal good

a good people buy more of when their income increases and less of when their income decreases

inferior good

a good people buy less of when their income increases

individual demand curve

a graph showing how much one consumer is willing to buy at different prices

equilibrium price

the price where quantity supplied equals quantity demanded

equilibrium quantity

the amount bought and sold at the equilibrium

market-clearing price

another name for equilibrium price; the price where there is no shortage or surplus

surplus

when quantity supplied is greater than quantity demanded. usually happens when the price is too high

shortage

when quantity demanded is greater than quantity supplied. usually happens when the price is too low

price elasticity of demand

measures how much quantity demanded responds to a change in price

midpoint method

a way to calculate elasticity using the average of the starting and ending values to find percentage changes

perfectly inelastic demand

quantity demanded does not change at all when price changes. $\text{Elasticity} = 0$. vertical demand curve

perfectly elastic demand

consumers will buy at only one price; even a tiny price increase causes quantity demanded to drop to zero. horizontal demand curve

elastic demand

quantity demanded changes by a greater percentage than price changes. $\text{elasticity} > 1$

inelastic demand

quantity demanded changes by a smaller percentage than price changes. $\text{elasticity} < 1$

unit elastic demand

quantity demanded changes by the same percentage as price. $\text{elasticity} = 1$

total revenue

the total money a business receives from sales

cross-price elasticity of demand

measures how the demand for on good changes when the price of another good changes positive = substitutes, negative = complements

income elasticity of demand

measures how much demand changes when consumers' income changes positive = normal good negative = inferior good

income-elastic demand

demand changes by a greater percentage than income changes. $\text{Income elasticity} > 1$

income-inelastic demand

demand changes by a smaller percentage than income changes. income elasticity is positive but less than $1$

price elasticity of supply

measures how much quantity supplied responds to a change in price

perfectly inelastic supply

quantity supplied stays the same regardless of price. vertical supply curve

perfectly elastic supply

producers will supply any quantity at one specific price. horizontal supply curve

calculating price elasticity of supply

$$\frac{\text{\% change in quantity supplied}}{\text{\% change in price}}$$

calculating income elasticity

$$\frac{\text{\% change in quantity demanded}}{\text{\% change in income}}$$